Investmentu.com: After Olympics, All Bets Are Off for China

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With $1 trillion in foreign reserves and double-digit economic growth, China is “the envy of the world,” says Dr. Mark Skousen, professor of economics at Rollins College and Chairman of http://www.InvestmentU.com

all bets are off after the Olympics.

New York, NY (PRWEB)April 25, 2006

With $1 trillion in foreign reserves and double-digit economic growth, China is “the envy of the world,” says Dr. Mark Skousen, professor of economics at Rollins College and Chairman of http://www.InvestmentU.com.

His recent fact-finding trip to China confirms, he says, that China is focused on keeping the economy booming so that the Olympics in 2008 will be the biggest international event in the country’s history.

But “serious trouble” lies ahead for China if it does not take necessary precaution, he says, and “all bets are off after the Olympics.”

According to Skousen, China faces four great challenges that will intensify and could become critical by 2008. They include:

1. Rising income inequality between rural and urban incomes: City Chinese are earnings twice as much as rural Chinese. As a result, millions of rural farmers are moving into the city, a massive migration that could cause social strife. The government is trying to keep up with heavy construction of high-rise apartments, but it may not be enough.

2. A potential financial crisis: 70% of private banks are in trouble in China with massive bad loans: the Chinese capital markets are struggling, following the stock market collapse in 2001-04; currency speculation could surface; and if much of the investment turns out to be bad–-- China could be in for a financial disaster despite its nearly $1 trillion in foreign reserves, strong revenues and low deficit.

3. Lack of accountability among government agencies, including the judiciary: After decades of communist rule under Mao, there is a sense that no independent judiciary and basic property rights exist today. If a government official wants to build a high-rise over a piece of farmland, he does it – no questions asked.

4. Unstable geo-politics: Growing Chinese nationalism could destabilize the region if an incident arises with Japan or Taiwan. Fortunately, the rapid rise in trade and investment between the three will discourage an all-out conflict. Nonetheless, Beijing’s massive military buildup (at double-digit annual rates) is cause for concern.

To access Dr. Skousen’s three-part series on China’s economic future, follow this link